2007 Interim Report - INTIME.COM.CN · Management Discussion and Analysis 7 With the concerted...

2007 Interim

Report

中期報告

2007 Interim Report2007 中期報告

Contents

Corporate Profile 2

Corporate Information 3

Management Discussion and Analysis 5

Other Information 11

Interim Condensed ConsolidatedIncome Statement 15

Interim Condensed ConsolidatedBalance Sheet 16

Interim Condensed ConsolidatedStatement of Changes in Equity 18

Interim Condensed ConsolidatedCash Flow Statement 19

Notes to the Interim CondensedConsolidated Financial Statements 20

Corporate Profile

2 Intime Department Store (Group) Company Limited

Intime Department Store (Group) Company Limited (the “Company”) was incorporated in the Cayman

Islands with limited liability on 8 November 2006. The Company’s shares were listed on the Main Board of

The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 20 March 2007. Pursuant to a

reorganization arrangement of the Group in preparation for the listing on the Stock Exchange (the

“Reorganization”), the Company became the holding company of the domestic operating entities engaging

in department store business and their subsidiaries.

The Group commenced its department store business in 1998 when its first department store was established

in Hangzhou, namely the Hangzhou Wulin store. After eight years of development, the Group has developed

into a large-scale department store chain in Zhejiang province that owns five department stores and holds

equity interests in two domestic listed department store companies — Baida Group Co., Ltd. (“Baida”) and

Wuhan Department Store Group Co., Ltd. (“Wushang”).

The Group currently wholly owns five department stores located in the principal cities within Zhejiang

province, with one store each in Hangzhou, Wenzhou and Jinhua, and two in Ningbo. The Group has

become the largest department store chain in Zhejiang province in terms of sales. In terms of sales per

square meter, the operating results of the Group’s flagship Hangzhou Wulin store outperforms its peers

within Zhejiang province.

The Group sets “Bring you a new lifestyle” as its motto and targets youth and modern families as major

customers. The Group positions its sales in the medium to high-end merchandise with a commitment to

offer excellent shopping experiences.

Interim Report 2007

Corporate Information

3

REGISTERED OFFICE

P.O. Box 309GTUgland HouseSouth Church Street, George TownGrand CaymanCayman Islands

HEAD OFFICE

42nd FloorYintai Centre Tower C2 Jianguomenwai AvenueBeijing 100022PRCTel: +86 10 65057260Fax: +86 10 65688886Email: [email protected]

PLACE OF BUSINESS IN HONG KONG

Room 1707, Tower IIAdmiralty Centre18 Harcourt RoadHong Kong

COMPANY SECRETARY ANDQUALIFIED ACCOUNTANT

CHOW Hok Lim (FCCA, CPA, CFA)

AUTHORIZED REPRESENTATIVES

CHING Siu LeungNo. 501, Unit 1, Building 4Qianmen East StreetBeijing, PRC

CHOW Hok LimFlat 2405, Block AKornhillQuarry BayHong Kong

AUDIT COMMITTEE

LEE Lawrence (Chairman)

CHOW Joseph

CHEN Dagang

REMUNERATION COMMITTEE

CHING Siu Leung (Chairman)

CHEN Dagang

CHOW Joseph

NOMINATION COMMITTEE

XIN Xiang Dong (Chairman)

LEE Lawrence

CHOW Joseph

STRATEGIC DEVELOPMENTCOMMITTEE

SHEN Guojun (Chairman)

CHING Siu Leung

CHOW Joseph

PRINCIPAL SHARE REGISTRAR ANDTRANSFER OFFICE

Butterfield Fund Services (Cayman) Limited

Butterfield House

68 Fort Street

P.O. Box 705

George Town, Grand Cayman

Cayman Islands

Corporate Information


HONG KONG BRANCH SHAREREGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong

Investor Services Limited

Shops 1712–1716, 17th Floor

Hopewell Centre

183 Queen’s Road East

Wanchai

Hong Kong

PRINCIPAL BANKERS

JP Morgan Chase Bank N.A.

20/F JP Morgan Tower

138 Shatin Rural Committee Road

Shatin

New Territories

Hong Kong

China Construction Bank Co. Ltd.

Hangzhou Zhongshan Branch

No. 297 Zhongshanbeilu

Hangzhou, Zhejiang 310003

PRC

COMPLIANCE ADVISER

Guotai Junan Capital Limited

27th Floor, Low Block

Grand Millennium Plaza

181 Queen’s Road Central

Hong Kong

Interim Report 2007

Management Discussion and Analysis

5

Business Overview

Industry Overview

In the first half of 2007, according to information published by the National Bureau of Statistics of China,

the PRC economy continued to grow steadily and rapidly with a GDP growth of 11.5%, which is 0.5% over

the same period of last year. Underpinned by rising disposable incomes of urban households and the

widespread pursuit of higher-quality lifestyle, the total retail sales of consumer goods in the PRC during the

first half of 2007 amounted to approximately RMB4,204.4 billion, representing an increase of about 15.4%

from the corresponding period of last year.

The Group has continued to operate under a favorable macroeconomic environment in Zhejiang province.

In the first half of 2007, the GDP of Zhejiang province has increased to RMB834.4 billion, representing an

increase of about 14.7% from the corresponding period of last year. The per capita disposable income of

urban household in Zhejing province has surged by approximately 11.9% as compared to the corresponding

period of last year. Driven by the residents’ increasing consumption power, the total retail sales of consumer

goods in Zhejiang province has risen to about RMB297.6 billion, representing a strong growth of 15.7%

from the corresponding period of last year.

Operational Review

During the period under review, the Group’s department stores achieved a strong gross sales growth rate

of 27.5%. This was the result of the continuous improvement in operational efficiency, better merchandise

mix and brand selection, friendly customer services and more organized sales and promotional campaigns.

The Group further strengthened its position as the leading department store chain in Zhejiang province by

opening Jinhua Fuhua store and Wenzhou Shimao store in January 2007 and February 2007 respectively.

These new stores added a total of 67,312 square meters of retailing space to our existing portfolio. In

addition, the Group has entered into a joint-venture agreement with a leading foreign retail franchise, Lotte

Shopping Company Limited, the largest department store operator in the Republic of Korea, to jointly

operate a department store located in Wangfujing, Beijing. Through such cooperation, the Group expects

to acquire world-class retail operation and management expertise and enhance the Group’s operation and

management standards.

On 20 June 2007, the Company appointed a member to the board of directors of Wushang and started to

exercise a certain level of influence on Wushang’s management and operation. The Group currently owns

22.62% equity interest in Wushang, which is the largest department store group in Hubei province. The

Group will continue to explore opportunities of further cooperation and integration with Wushang.



The term of the lease for the premises at which our Ningbo store No. 1 is located has been successfullyextended to 31 March 2025 from a previous termination date of 31 July 2017. This revised lease term willfurther enable the Company to conduct the Group’s business on a long term basis with security of tenure.In addition, we obtained the Building Ownership Certificate in respect of the Group’s office premise locatedat Room 701, No. 528 Yan’an Road, Hangzhou, Zhejiang Province, PRC in August 2007.

On 10 April 2007, Zhejiang Intime, a wholly-owned subsidiary of the Company, entered into a capitalincrease framework agreement with the equity holders of 杭州新泰房地產開發有限公司 (Hangzhou XintaiProperty Development Co., Ltd.) (“Xintai”) and the equity holders of 浙江浙聯房產集團有限公司 (ZhejiangZhelian Property Group Co., Ltd ) (“Zhelian Property”). Xintai and Zhelian Property are the joint owners of aproperty development project in Hangzhou, PRC. Pursuant to the agreement, Zhejiang Intime conditionallyagreed, amongst other things, to make a capital contribution of RMB500,000,000 to Xintai in return for50% equity interest in the enlarged registered capital of Xintai, subject to entering into specific transactionagreements and other documentation in relation thereto. Zhejiang Intime has not yet been required tomake any such capital contribution as of 30 June 2007.

On 10 September 2007, Intime Investment Management, a wholly-owned subsidiary of the Company,entered into a sale and purchase agreement and a loan assignment agreement with Zhelian Property,pursuant to which Intime Investment Management has agreed to acquire and Zhelian Property has agreedto sell: 1) a 33% equity interest in 杭州海威房地產開發有限公司 (Hiwell Real Estate Company Limited)(“Hiwell Real Estate”) for a total cash consideration of RMB33,000,000.00 and; 2) the outstandingshareholder’s loan made by Zhelian Property to Hiwell Real Estate for a total cash consideration ofRMB204,808,370.96. Through the acquisition, the Group intends to acquire the department store propertycurrently under development by Hiwell Real Estate and plans to use it to expand and further enhance theGroup’s market leadership position in Hangzhou retail market.

On 10 September 2007, the Company was admitted as a constituent of the 200-stock Hang Seng CompositeIndex Series.

Prospects

For the second half of 2007, on the basis that the PRC economy will continue to maintain its steady androbust growth, the Group believes that retail sales of consumers goods will also continue to rise. Undersuch a favorable macro-economic environment, the department store industry in the PRC offers greatgrowth potential. Our two new stores, Ningbo Wanda store and Hangzhou Yuhang store, are expected tobe opened in the second half of 2007. We are confident of the Group’s prospects for the year of 2007.

Going forward, the Group will continue to enhance its core competitive edge, expand store footprint andfurther secure its leadership position in the Zhejiang province, and explore opportunities to achieve broadernationwide business coverage. The Group will also work more closely with the management of companiesin which it holds minority interests and explore more opportunities for mutually beneficial business integration.The Group will continue to seek acquisition opportunities, targeting strategic retail assets, commercialproperties and businesses of attractive department stores, with a goal to extend its existing regionaldominance and to gradually establish a leading nation-wide department store chain.

Interim Report 2007


7

With the concerted efforts from our employees, we believe that the Group’s core competence will befurther strengthened and the Group will deliver more value to our shareholders and customers.

Financial Review

The Group’s business achieved significant growth in the first half of 2007. For the six months ended 30June 2007, the revenue of the Group amounted to approximately RMB405,862,000, representing an increaseof approximately 22.5% from the corresponding period of last year. Profit attributable to the equity holdersof the parent increased by approximately 63.8% to approximately RMB172,419,000. Basic earnings pershare was approximately RMB0.11.

Total gross sales proceeds and revenue

For the six months ended 30 June 2007, total gross sales proceeds of the Group (that is, aggregateproceeds from direct sales and gross revenue from concessionaire sales) reached RMB1,549.8 million, anincrease of 27.5% over the corresponding period of last year. This increase was primarily attributable to theopening of the Jinhua Fuhua store and Wenzhou Shimao store in early 2007, the rapid growth in sales inthe two Ningbo stores, and the steady growth in sales in Hangzhou Wulin store. In respect of total salesproceeds contributed by all stores of the Group, Hangzhou Wulin Store accounted for approximately 53.1%of total sales proceeds. Ningbo Store No. 1 and Ningbo Store No. 2 contributed approximately 17.9% and20.2% of total sales proceeds of the Group, respectively.

In the first half of 2007, commission from concessionaire sales and revenue from direct sales accounted forapproximately 73% and 26% of the Group’s revenue, respectively. Commission rate from concessionairesales was approximately 20.6%, up from approximately 20.4% in the first half of 2006. The Group willconduct regular reviews on the performance of the Group’s suppliers and concessionaires, with the aim toenhance and strengthen product portfolios and provide better shopping choices to its customers.

Other Operating Income

For the six months ended 30 June 2007, the Group’s other revenues were approximately RMB91,622,000,representing an increase of approximately 466.4% as compared to the corresponding period of last year.The increase was mainly due to the significant increase in one-off interest income derived from the over-subscription funds for the new shares and the interest income derived from the newly raised fund duringthe period.

Purchase of and change in inventories

For the six months ended 30 June 2007, the Group’s purchases of and changes in inventories amountedto approximately RMB79,800,000, representing an increase of approximately 2.7% as compared to thecorresponding period of last year. The increase was mainly attributable to increased demand for inventoriesdriven by sales of goods in the first half of 2007. The direct sales gross profit margin for the period wasmaintained at a level of 24.3%, representing an increase of 1.9% from 22.4% for the corresponding periodof last year. Such margin expansion was mainly due to enhancement in merchandise mix.



Staff costs

For the six months ended 30 June 2007, the Group’s staff costs increased by RMB7,927,000 or 33% to

RMB31,866,000, which was primarily attributable to increased employee numbers due to the opening of

new stores in early 2007. Staff costs as a percentage of revenue for the period was 7.9%, representing a

marginal increase of 0.7% from 7.2% for the corresponding period of last year. This increase was primarily

attributable to an increase in new employees due to the opening of new stores in Zhejiang province and in

preparation for the opening of additional stores, and increase in wages.

Depreciation and amortization

For the six months ended 30 June 2007, the Group’s depreciation and amortization increased to

RMB19,091,000, representing an increase of 89.9% from the corresponding level of last year. The increase

was primarily attributable to the inclusion of depreciation cost and amortization of land use rights for the

new stores opened.

Other operating expenses

For the six months ended 30 June 2007, the Group’s other operating expenses was approximately

RMB119,525,000, representing an increase of approximately 60.8% from the corresponding period of last

year. The increase was mainly due to the one-off expenses for the listing of shares of the Company on the

Stock Exchange in March 2007 and the increase of rental expenses for the opening of new stores in early

2007.

Operating profit

For the six months ended 30 June 2007, the Group’s operating profit increased to RMB247,202,000,

representing an increase of 31.8% as compared to the corresponding period of last year. The increase was

mainly due to the higher growth rate of revenue than that of operating expenses for the period.

Finance costs

For the six months ended 30 June 2007, the Group’s finance costs was approximately RMB24,618,000,

representing an increase of 52.3% as compared to the corresponding period of last year. The increase was

mainly attributable to increase in bank borrowing to finance business operations.

Interim Report 2007


9

Income tax expense

For the six months ended 30 June 2007, the Group’s income tax expense was RMB51,132,000, representing

a decrease of 3.6% as compared to the corresponding period of last year. Effective tax rate of the Group

for the period was 23%, a decrease of 7.9% from 30.9% for the same period of last year. The decrease

was mainly attributable to the inclusion of higher portion of non-taxable interest income of the Company

during the period.

Profit attributable to equity holders of the parent

Profit attributable to equity holders of the parent for the six months ended 30 June 2007 was approximately

RMB172,419,000, showing an increase of 63.8% from RMB105,266,000 for the corresponding period of

last year. Margin of profit attributable to equity holders of the parent for the period was 42.5%, representing

an increase of 10.7% from 31.8% for the corresponding period of last year.

Liquidity and financial resources

As at 30 June 2007, the Group’s cash and cash equivalents amounted to RMB2,127,178,000 (31 December

2006: RMB317,861,000). This increase was mainly due to the cash inflow from operating activities and

proceeds from the issuance of new shares.

As at 30 June 2007, total borrowings were approximately RMB940,000,000 (31 December 2006:

RMB649,000,000). All of the borrowings were short-term bank borrowings and denominated in Renminbi.

The gearing ratio is defined as net debt (represented by borrowings net of cash and cash equivalents)

divided by equity. The gearing ratio decreased from approximately 36.5% at 31 December 2006 to nil as at

30 June 2007.

Net current assets/liabilities

The net current liabilities position of approximately RMB588,188,000 as at 31 December 2006 has been

improved to a net current asset position of approximately RMB1,587,488,000 as at 30 June 2007. This

improvement was mainly due to the cash inflow from operating activities and proceeds from the issuance

of new shares.

Contingent Liabilities

As at 30 June 2007, the Group had no material contingent liabilities.



Pledge of Assets

As at 30 June 2007, certain buildings, investment properties and land use rights with carrying amount of

approximately RMB176,405,000 had been pledged to the Industrial and Commercial Bank of China to

obtain bank loans of RMB400,000,000 and a time deposit amount of approximately RMB219,231,000

had been pledged to the ABN AMRO to obtain bank loans of RMB200,000,000.

Foreign Exchange Risk

Substantially all the revenue and expenses of the Group are settled in Renminbi. Most of the assets and

liabilities of the Group are denominated in Renminbi except proceeds from the listing which were denominated

in Hong Kong dollars. The fluctuation of Renminbi will expose the Group to foreign exchange risk. The

Group has not used any derivatives to hedge the potential foreign exchange risk.

Human Resources

As at 30 June 2007, the Group had about 1,118 employees. The Group strives to offer a good working

environment, a diversified range of training programs as well as an attractive remuneration package to the

employees. The Group endeavors to motivate its staff with performance-based remuneration. On top of

basic salary, staff with outstanding performance will be rewarded by way of cash bonuses, share options,

honorary awards or a combination of all the above to further align the interests of the employees and the

Company, to attract talented individuals, and to create long-term incentive for the staff.

Interim Report 2007

Other Information

11

DISCLOSURE OF INTERESTS

Directors’ interests in the securities of the Company and its associated corporations

As at 30 June 2007, the interests of each Director and the chief executive of the Company in the ordinary

shares of the Company required to be recorded in the register to be kept by the Company pursuant to

section 352 of the SFO or as otherwise notified to the Company and the Hong Kong Stock Exchange

pursuant to the Model Code for Securities Transactions by Directors of Listed Companies were as follows:

Approximate

percentage of

Number and class interest in

Name of Directors Nature of Interest of securities(2) such corporation

Mr. Shen Guojun Corporate Interest(1) L769,652,255 42.76%

Mr. Ching Siu Leung Beneficial(3) L2,200,000 0.12%

Mr. Xin Xiangdong Nil Nil Nil

Mr. Chen Dagang Nil Nil Nil

Mr. Lawrence Lee Nil Nil Nil

Mr. Joseph Chow Nil Nil Nil

Notes:

(1) Mr. Shen Guojun is the beneficial owner of the entire share capital of Fortune Achieve Group Ltd., which in turn is the

beneficial owner of the entire issued share capital of Glory Bless Limited, which in turn is the beneficial owner of the entire

issued share capital of Intime International Holdings Limited, which holds 769,652,255 Shares.

(2) The Letter “L” denotes the person’s long position in such Shares.

(3) Mr. Ching was granted options under the Company’s Share Option Scheme on 21 March 2007 exercisable in respect of a

total of 2,200,000 shares in the Company over a vesting period.

Save as disclosed above, as at 30 June 2007, none of the Directors, the chief executive and any other

person had any long or short positions in the shares, underlying shares or debentures of the Company as

recorded in the register required to be kept under section 336 of the SFO.

Other Information


SUBSTANTIAL SHAREHOLDERS

As at the 30 June 2007, so far as was known to the Directors, persons having interests and short positions

in 5% or more in the shares, underlying shares and debentures of the Company as recorded in the register

of interests and short positions required to be kept by the Company pursuant to section 336 of the SFO

were as follows:

Approximate

percentage of

Number of interest in

Name of shareholder Nature of Interest Ordinary Shares(1) the Company

Mr. Shen Guojun(2) Corporate Interest L769,652,255 42.76%

Fortune Achieve Group Ltd.(2) Corporate Interest L769,652,255 42.76%

Glory Bless Limited(2) Corporate Interest L769,652,255 42.76%

Intime International Holdings Beneficial Interest L769,652,255 42.76%

Limited(2)

Warburg Pincus & Co.(3) Corporate Interest L405,000,000 22.50%

Warburg Pincus Partners Corporate Interest L405,000,000 22.50%

LLC(3)

Warburg Pincus IX, LLC(3) Corporate Interest L202,500,000 11.25%

Warburg Pincus Private Beneficial Interest L202,500,000 11.25%

Equity IX, L.P.(3)

Warburg Pincus International Beneficial Interest L194,100,300 10.78%

Partners, L.P.(3)

UBS AG Corporate Interest L92,056,000 5.11%

Notes:

(1) The letter “L” denotes the person’s long position in such Shares.

(2) Mr. Shen Guojun is the beneficial owner of the entire issued share capital of Fortune Achieve, which in turn is the beneficial

owner of the entire issued share capital of Glory Bless, which in turn is the beneficial owner of the entire issued share capital

of Intime International, which holds 769,652,255 Shares.

(3) Warburg Pincus Private Equity IX L.P. and Warburg Pincus International Partners, L.P. are part of the Warburg Pincus Funds.

The direct general partner of Warburg Pincus Private Equity IX, L.P. is Warburg Pincus IX, LLC. Warburg Pincus IX, LLC is

therefore deemed to be interested in the shares held by Warburg Pincus Private Equity IX, L.P. The controlling entity of the

Warburg Pincus Funds is Warburg Pincus Partners LLC, which is a subsidiary of Warburg Pincus & Co. Each of Warburg

Pincus Partners LLC and Warburg Pincus & Co. is therefore deemed to be interested in the shares held by the Warburg

Pincus Funds, which includes Warburg Pincus International Partners, L.P. and Warburg Pincus Private Equity IX L.P. as well

as five other funds.

Interim Report 2007

Other Information

13

SHARE OPTION SCHEME

Pursuant to the Company’s share option scheme approved by the resolution of the Company’s shareholders

dated 24 February 2007, the Company may grant options to any employee, management member or

director of the Company, or any of the Company’s subsidiaries and third party service providers. The

purpose of the Share Option Scheme is to attract skilled and experienced personnel, to incentivise them to

remain within the Group and to give effect to the Group’s customer-focused corporate culture, and to

motivate them to strive for the Group’s future development and expansion, by providing them with the

opportunity to acquire equity interests in the Company.

The Share Option Scheme will remain valid for a period of ten years commencing on 20 March 2007. The

period with which the Options must be exercised will be specified by the Company at the time of grant and

must expire no later than 10 years from the date of grant of the Option (being the date on which the board

makes a written offer of grant of the Option to the relevant proposed beneficiary) unless the Company

obtains separate shareholder approval in relation to such grant.

The subscription price for the shares under the Share Option Scheme will not be less than the higher of (i)

the closing price of the shares as stated in the Stock Exchange’s daily quotations sheet on the date of

grant, which must be a business day; (ii) the average closing price of the shares as stated in the Stock

Exchange’s daily quotations sheets for the five business days immediately preceding the date of the grant;

and (iii) the nominal value of a share.

On 21 March 2007, 11,600,000 share options at an exercise price of HK$6.44 each for the purpose of

providing incentives to director and eligible employees were granted. These options will expire two to five

years from the grant date.

Details of the share options outstanding during the current period are as follows:

Number of share option

Granted during the period and outstanding as at 30 June 2007 11,600,000

Exercisable at 30 June 2007 —

PURCHASE, SALE AND REDEMPTION OF COMPANY’S SHARE

Since the listing of shares on 20 March 2007 to the date of this report, the Group has not purchased, sold

or redeemed any of the Company’s listed shares.

Other Information


SUFFICIENCY OF PUBLIC FLOAT

The Company has maintained a sufficient public float throughout the period from the date of listing ofshares to 30 June 2007.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERANCE PRACTICES

The Board is of the view that the Company has complied with Code on Corporate Governance Practicesas set out in Appendix 14 of the Listing Rules for the period from the date of listing to 30 June 2007 exceptthat Mr. SHEN Guojun, the Chairman of the Company, was unable to attend the 2007 Annual GeneralMeeting due to business reasons. However, Mr. Xin Xiangdong, the Chairman of our Nomination Committeeand a non-executive director of our Company, presided as chairman of the Annual General Meeting, andMr. Xin, and Mr. Zhou Minghai, our President, and Mr. Chen Xiaodong, our Chief Financial Officer and VicePresident, were present to answer any questions raised by shareholders at the Annual General Meeting.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BYDIRECTORS OF LISTED ISSUERS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers asset out in Appendix 10 of the Listing Rules (“Model Code”) as its own code of conduct regarding Director’ssecurities dealing.

The Board is pleased to confirm, after making specific enquiries with the Directors, that all Directors havefully complied with the code provisions of Model Code from the date of listing to 30 June 2007.

AUDIT COMMITTEE

The audit committee of the Company (the “Audit Committee”) has considered and reviewed the accountingprinciples and practices adopted by the Group and has discussed matters in relation to internal control andfinancial reporting with the management, including the review of the unaudited condensed interim accountsfor the period ended 30 June 2007 of the Company. The Audit Committee considered that the interimfinancial report for the six months ended 30 June 2007 is in compliance with the relevant accountingstandards, rules and regulations and appropriate disclosures have been duly made.

APPRECIATION

The Board would like to express its sincere appreciation to the shareholders, customers, suppliers andstaff for their continued support to the Group.

By Order of the BoardIntime Department Store (Group) Company Limited

Shen GuojunChairman

Hong Kong, 13 September 2007

Interim Report 2007

Interim Condensed Consolidated Income StatementFor the six months ended 30 June 2007

15

For the six months

ended 30 June

2007 2006

(Unaudited) (Unaudited)

Notes RMB’000 RMB’000

Revenue 3 405,862 331,217

Other income 4 91,622 16,177

Purchases of and changes in inventories (79,800) (77,720)

Staff costs (31,866) (23,939)

Depreciation and amortisation (19,091) (10,052)

Other operating expenses (119,525) (74,326)

Gain on receipt of shares from share reform

of a listed company — 24,514

Other gains — net — 1,680

Operating profit 247,202 187,551

Finance costs 5 (24,618) (16,166)

Profit before income tax 6 222,584 171,385

Income tax expense 7 (51,132) (53,033)

Profit for the period 171,452 118,352

Attributable to:

Equity holders of the parent 172,419 105,266

Minority interests (967) 13,086

Earnings per share for profit attributable

to the equity holders of the parent

during the period

(expressed in RMB per share)

— Basic 8 0.11 0.08

— Diluted 8 0.11 N/A

Dividends 9 — —

Interim Condensed Consolidated Balance SheetAs at 30 June 2007


As at 30 As at 31

June 2007 December 2006

(Unaudited) (Audited)


ASSETS

Non-current assets

Property, plant and equipment 10 180,093 147,019

Investment properties 10 1,185 6,490

Land use rights 10 329,587 64,034

Intangible assets 246 286

Prepaid rental 12,433 3,325

Available-for-sale financial assets 11 1,461,117 1,459,474

Investment in an associate 12 425,544 —

Deferred income tax assets 4,271 1,106

2,414,476 1,681,734

Current assets

Inventories 13 22,032 25,763

Deposits, prepayments and other receivables 14 476,268 134,836

Due from related parties 23 125,882 50,746

Held-to-maturity investments 20,000 20,000

Cash in transit 15 10,438 15,159

Pledged deposits 16 219,231 —

Cash and cash equivalents 16 2,127,178 317,861

3,001,029 564,365

Total assets 5,415,505 2,246,099

Interim Report 2007

Interim Condensed Consolidated Balance SheetAs at 30 June 2007

17

As at 30 As at 31

June 2007 December 2006



EQUITY

Capital and reserves attributable to the Company’s

equity holders

Share capital 17 140 105

Reserves 3,665,153 908,303

3,665,293 908,408

Minority interests 107,033 —

Total equity 3,772,326 908,408

LIABILITIES

Non-current liabilities

Deferred income tax liabilities 229,638 185,138

229,638 185,138

Current liabilities

Trade payables 18 235,587 269,708

Other payables 19 204,263 200,167

Due to related parties 3,219 8,871

Income tax payable 30,472 24,807

Interest-bearing borrowings 20 940,000 649,000

1,413,541 1,152,553

Total liabilities 1,643,179 1,337,691

Total equity and liabilities 5,415,505 2,246,099

Net current assets/(liabilities) 1,587,488 (588,188)

Total assets less current liabilities 4,001,964 1,093,546

Interim Condensed Consolidated Statement of Changes in EquityFor the six months ended 30 June 2007


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B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

Six

mon

ths

ende

d 30

Jun

e 20

07 (U

naud

ited)

At 1

Jan

uary

200

710

5—

299,

895

133,

842

354,

330

45,6

2674

,867

(257

)—

908,

408

—90

8,40

8Pr

ofit

for t

he p

erio

d—

——

——

—17

2,41

9—

—17

2,41

9(9

67)

171,

452

Issu

e of

sha

res

352,

403,

703

——

——

——

—2,

403,

738

—2,

403,

738

Shar

e is

sue

cost

s—

(84,

822

)—

——

——

——

(84,

822

)—

(84,

822

)Em

ploy

ee s

hare

opt

ion

sche

me-

valu

eof

em

ploy

ee s

ervi

ces

——

——

——

—1,

051

1,05

1—

1,05

1C

apita

l con

tribu

tion

by th

e m

inor

ity in

tere

st—

——

——

——

——

—10

8,00

010

8,00

0C

hang

e in

fair

valu

e of

ava

ilabl

e-fo

r-sa

lefin

anci

al a

sset

s, n

et o

f tax

——

——

1,42

9,82

1—

——

1,42

9,82

1—

1,42

9,82

1R

ever

se p

revi

ousl

y re

cogn

ised

fair

valu

ech

ange

s on

ava

ilabl

e-fo

r-sa

le in

vest

men

tup

on tr

ansf

er to

inve

stm

ent i

n as

soci

ate

——

——

(1,1

52,9

82)

——

——

(1,1

52,9

82)

—(1

,152

,982

)Ef

fect

of c

hang

es in

tax

rate

for p

rovi

sion

of

defe

rred

taxa

tion

on fa

ir va

lue

chan

ges

on a

vaila

ble-

for-

sale

fina

ncia

l ass

ets

——

——

28,3

46—

——

—28

,346

—28

,346

Cur

renc

y tra

nsla

tion

diffe

renc

es—

——

——

——

(40,

686

)—

(40,

686

)—

(40,

686

)

At 3

0 Ju

ne 2

007

140

2,31

8,88

129

9,89

513

3,84

265

9,51

545

,626

247,

286

(40,

943

)1,

051

3,66

5,29

310

7,03

33,

772,

326

Six

mon

ths

ende

d 30

Jun

e 20

06(U

naud

ited)

At 1

Jan

uary

200

610

5—

211,

695

20,1

628,

846

27,8

7232

,014

(55

)—

300,

639

177,

223

477,

862

Prof

it fo

r the

per

iod

——

——

——

105,

266

——

105,

266

13,0

8611

8,35

2C

apita

l con

tribu

tion

by e

quity

hol

ders

of s

ubsi

diar

ies

——

29,2

84—

——

——

—29

,284

19,5

2248

,806

Cha

nge

in fa

ir va

lue

of a

vaila

ble-

for-

sale

finan

cial

ass

ets,

net

of t

ax—

——

—29

5,93

9—

——

—29

5,93

930

,171

326,

110

Cur

renc

y tra

nsla

tion

diffe

renc

es—

——

——

——

(161

)—

(161

)—

(161

)Ac

quis

it ion

of m

inor

it y in

t er e

sts

——

114,

000

34,1

464,

738

19,5

97—

——

172,

482

(172

,482

)—

At 3

0 Ju

ne 2

006

105

—35

4,97

954

,308

309,

523

47,4

6913

7,28

0(2

16)

—90

3,44

967

,520

970,

969

Interim Report 2007

Interim Condensed Consolidated Cash Flow StatementFor the six months ended 30 June 2007

19

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Net cash generated from operating activities 133,933 123,315

Net cash used in investing activities (1,035,242) (476,781)

Net cash flows generated from financing activities 2,753,142 336,885

Increase/(Decrease) in cash and cash equivalents 1,851,833 (16,581)

Cash and cash equivalents at beginning of the period 317,861 198,305

Effects of foreign exchange rate changes, net (42,516) —

Cash and cash equivalents at end of the period 2,127,178 181,724

Notes to the Interim Condensed Consolidated Financial StatementsAs at 30 June 2007


1. General information

Intime Department Store (Group) Company Limited (the “Company”) was incorporated in the Cayman

Islands on 8 November 2006 as an exempted company with limited liability under the Cayman

Companies Law. The address of the Company’s registered office is M&C Corporate Services Limited,

P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands.

The Company and its subsidiaries (together the “Group”) are principally engaged in the operation and

management of department stores in the Peoples Republic of China (the “PRC”).

The Company’s shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited

(the “Stock Exchange”) on 20 March 2007.

The interim condensed consolidated financial statements were approved and authorised for issue by

the board of directors on 13 September 2007.

2. Basis of preparation and accounting policies

2.1 Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June

2007 have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34

“Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants

(the “HKICPA”).

The interim condensed consolidated financial statement do not include all the information and

disclosures required in the annual financial statements, and should be read in conjunction with

the Group’s annual financial statements as at 31 December 2006.

The accounting policies adopted in the preparation of the interim condensed financial statements

are consistent with those followed in the preparation of the Group’s annual financial statements

for the year ended 31 December 2006, except for the adoption of new Standards and

Interpretations, noted below. The adoption of these standards did not have any effect on the

financial position or performance of the Group.

Interim Report 2007


21

2. Basis of preparation and accounting policies (Continued)

2.2 Impact of new and revised Hong Kong Financial Reporting Standards

The accounting policies adopted in the preparation of the Interim Condensed Financial Statements

are consistent with those followed in the preparation of the Group’s annual financial statements

for the year ended 31 December 2006, except for the accounting policy on associate and the

adoption of the new and revised Hong Kong Financial Reporting Standards and interpretations

as noted below.

HKAS 1 Amendment Capital Disclosures

HKFRS 7 Financial Instruments: Disclosures

HK(IFRIC)-Int 7 Applying the Restatement Approach under HKAS 29

Financial Reporting in Hyperinflationary Economies

HK(IFRIC)-Int 8 Scope of HKFRS 2

HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives

HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment

The adoption of the above new and revised standards and interpretations has had no material

effect on the accounting policies of the Group and the methods of computation in the Interim

Condensed Financial Statements.

2.3 Significant accounting policies

Associates

Associates are all entities over which the Group has significant influence but not control, generally

accompanying a shareholding of between 20% and 50% of the voting rights. Investments in

associates are accounted for using the equity method of accounting and are initially recognised

at cost. The Group’s investment in associates includes goodwill (net of any accumulated

impairment loss) identified on acquisition.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income

statement, and its share of post-acquisition movements in reserves is recognised in reserves.

The cumulative post-acquisition movements are adjusted against the carrying amount of the

investment. When the Group’s share of losses in an associate equals or exceeds its interest in

the associate, including any other unsecured receivables, the Group does not recognise further

losses, unless it has incurred obligations or made payments on behalf of the associate.



3. Revenue and segment information

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Sales of goods — direct sales 105,449 100,211

Commissions from concessionaire sales 297,239 227,683

Rental income 3,174 3,323

— Rental income from investment properties 1,221 1,588

— Sublease rental income 1,953 1,735

405,862 331,217

The commissions from concessionaire sales are analyzed as follows:

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Gross revenue from concessionaire sales 1,444,384 1,115,020

Commissions from concessionaire sales 297,239 227,683

The direct sales and gross revenue from concessionaire sales are mainly settled in cash, debit card

and credit card. The Group has no fixed credit policy.

The Group is mainly engaged in the operation and management of department stores in the PRC. All

of the Group’s operations are carried out in the PRC. In addition, most of the Group’s revenue and

operating profits are generated from business relating to the operations and management of department

stores. Therefore no business segment or geographical segment is presented.

Interim Report 2007


23

4. Other income

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Interest income 69,257 1,196

— from bank deposit 31,931 1,196

— from over subscription funds of new shares 37,326 —

Advertisement and promotion administration income 12,918 9,290

Credit card handling income 561 431

Dividend income 7,401 5,260

Others 1,485 —

91,622 16,177

5. Finance costs

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Interest expenses of bank borrowings wholly repayable

within five years 24,618 17,410

Foreign exchange gain — (1,244)

24,618 16,166



6. Profit before tax

The Group’s profit before tax is arrived at after charging/(crediting):

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Depreciation and amortisation 19,091 10,052

Store rental expenses 32,923 20,942

— Operating lease rental 32,281 20,297

— Operating sublease rental 642 645

Utility expenses 14,509 9,965

Advertising 6,524 6,311

Credit card charges 10,758 7,068

Auditor’s remuneration 600 242

Professional service charges 24,418 11,135

7. Income tax expense

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Current income tax — PRC 54,297 44,943

Deferred taxation (3,165) 8,090

51,132 53,033

The Company was incorporated in the Cayman Islands as an exempted company with limited liability

under the Cayman Companies Law and is exempted from payment of Cayman Islands income tax.

North Hill Holdings Limited (“North Hill”) and River Three Holdings Limited (“River Three”) were

incorporated in BVI as exempted companies with limited liability under the Company Law of BVI and

are exempted from payment of BVI income tax.

Interim Report 2007


25

7. Income tax expense (Continued)

The subsidiaries established in the PRC are subject to enterprise income tax (the “EIT”) at the rate of

33% (six months ended 30 June 2006: 33%) during the period except for Intime Department Store

Co., Ltd (“Shanghai Intime”) and Ningbo High-Tech Zone Guo Ruan Technology Company Limited

(“Ningbo Guoruan”).

Head office of Shanghai Intime is registered in Pudong New Area of Shanghai City and the applicable

income tax rate for Shanghai Intime head office is 15% (six months ended 30 June 2006: 15%).

Shanghai Intime Ningbo branch and Shanghai Intime Ningbo Tianyi branch are located in Ningbo City

and are subject to EIT at rate of 33% (six months ended 30 June 2006: 33%) during the period.

Pursuant to applicable income tax laws and regulations of the PRC, a new technology development

enterprise established in an approved new technology development zone is entitled to a preferential

tax rate of 15% (six months ended 30 June 2006: 15%). In addition, such entity is exempted from

PRC enterprise income tax for three years from its registration date and is also entitled to a 50%

reduction in income tax rate for the succeeding three years. In accordance with the approval from the

relevant PRC tax authority, Ningbo Guoruan was granted an income tax exemption for the three years

from 2005 to 2007 and a 50% reduction in income tax rate for the three years from 2008 to 2010.

On 16 March 2007, the National People’s Congress approved the Corporate Income Tax Law of the

People’s Republic of China (the “New CIT Law”), which will be effective from 1 January 2008. Under

the New CIT Law, the corporate income tax rate applicable to domestic companies from 1 January

2008 will be decreased from 33% to 25% or progressively increased from 15% to 25% within 5 years.

This unification in the corporate income tax rate will directly reduce or increase the Group’s effective

tax rate prospectively from 2008. According to HKAS 12, the deferred tax assets and deferred tax

liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is

realised or the liability is settled. As a result, the Company estimates that the change in the corporate

income tax rate has had the following impact on the results and financial position of the Group for the

six months ended 30 June 2007:

For the

six months

period ended

30 June 2007

(Unaudited)

RMB’000

Decrease in deferred tax liabilities 28,346



7. Income tax expense (Continued)

At the date of approval of the interim condensed consolidated financial statements, detailed

implementation and administrative requirements relating to the New CIT Law have yet to be announced.

These detailed requirements include regulations concerning the computation of taxable income, as

well as specific preferential tax treatments and their related transitional provisions. The Group will

further evaluate the impact on its operating results and financial position of future periods as more

detailed requirements are issued.

8. Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent

by the weighted average number of ordinary shares in issue during the period.

For the six months

ended 30 June

2007 2006


Profit attributable to equity holder of the parent 172,419,002 105,265,914

Weighted average number of ordinary shares in issue 1,602,500,000 1,350,000,000

Basic earnings per share 0.11 0.08

Interim Report 2007


27

8. Earnings per share (Continued)

Diluted

For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted

to assume conversion of all dilutive potential ordinary shares. The Company has dilutive potential from

share options. For the share options, a calculation is done to determine the number of shares that

could have been acquired at market price (determined as average share price of the Company’s

shares) based on the monetary value of the subscription rights attached to outstanding share options

to determine the ordinary shares deemed to be issued at no consideration. The shares are added to

the ordinary shares outstanding but no adjustment is made to net profit.

For the six months

ended 30 June

2007 2006


Net profit attributable to equity holders of the parent 172,419,002 105,265,914

Weighted average number of ordinary shares in issue 1,602,500,000 1,350,000,000

Adjustments for:

— share options 34,835 N/A

Weighted average number of ordinary shares for

diluted earnings per share 1,602,534,835 N/A

Diluted earnings per share 0.11 N/A

9. Interim dividend

The board of directors of the Company did not recommend the payment of any interim dividend for

the six months ended 30 June 2007 (six months ended 30 June 2006: Nil).



10. Property, plant and equipment, investment properties and land use rights

During the six months ended 30 June 2007, the Group acquired property, plant and equipment with

a cost of RMB47,653,000 (six months ended 30 June 2006: RMB13,462,000). Depreciation for

property, plant and equipment and investment properties is approximately RMB14,579,000 (six months

ended 30 June 2006: RMB8,945,000) during the period.

During the six months ended 30 June 2007, the Group acquired land use rights with a cost of

RMB270,000,000 (six months ended 30 June 2006: nil). Amortisation for land use rights is

RMB4,447,000 (six months ended 30 June 2006: RMB1,107,000) during the period.

The Group pledged certain of its building to secure the Group’s banking facilities. The carrying amounts

of these buildings as at 30 June 2007 are approximately RMB113,443,000 (Note 20).

The Group pledged certain of land use rights to secure the Group’s banking facilities. The carrying

amounts of these land use rights as at 30 June 2007 are approximately RMB62,962,000 (Note 20).

11. Available-for-sale financial assets

Year ended

Period ended 31 December

30 June 2007 2006


RMB’000 RMB’000

At beginning of year/period 1,459,474 276,819

Additions 77,460 646,730

Disposals — (4,238)

Gain on receipt of shares from share reform

of a listed company — 24,514

Reverse of revaluation surplus for transfer to

investment in associated (i) (Note 12) (1,962,853) —

Revaluation surplus 1,887,036 515,649

At end of year/period 1,461,117 1,459,474

Interim Report 2007


29

11. Available-for-sale financial assets (Continued)

(i) On 20 June 2007, the Group commenced to have significant influence over Wuhan Department

Store Group Co., Ltd. (武漢武商集團股份有限公司, “Wushang”) as the Company had one

representative appointed as a director of Wushang. Accordingly, the Group reversed previously

recognised revaluation surplus together with deferred tax liabilities on the investment in Wushang

and accounted for the investments in Wushang as investment in associate.

Available-for-sale financial assets include equity interests in the following companies of which A-

shares are listed on the stock exchanges in the PRC, which are established in the PRC and are

principally engaged in the operation and management of department stores in the PRC:

30 June 31 December

2007 2006


RMB’000 RMB’000

A-share tradable shares:

— Baida Group Co., Ltd. ( 杭州百大集團股份有限公司,

“Baida”) (note (a)) 1,137,141 667,132

— Wushang (Note 11) — 481,705

— Citic Development-Shenyang Commercial Building

(Group) Co., Ltd. (中興－沈陽商業大廈（集團）

股份有限公司) (note (b)) 143,757 40,272

A-share restricted tradable shares:

— Wushang (Note 11) — 164,475

A-share non-tradable shares:

— Baida (note (a)) 180,219 105,890

1,461,117 1,459,474

(a) As at 30 June 2007, the Group held 29.88% equity interests in Baida. However, the Group’s

directors do not regard Baida as an associate of the Group on the grounds that the Group has

no representatives in the board of directors of Baida and has no participation in decision making

of its financial and operating policies. Accordingly, the Group has not exercised any significant

influence on Baida.

(b) As at 30 June 2007, the Group held 3.96% equity interests in Citic Development-Shenyang

Commercial Building (Group) Co., Ltd.



12. Investment in an associate

The investment in an associate represents the investment in Wushang, which the Group owned 22.62%

equity interest. Wushang is a listed company involved in the operation and management of department

stores in PRC.

13. Inventories

30 June 31 December

2007 2006


RMB’000 RMB’000

Store merchandises — at cost 22,032 25,763

14. Deposits, prepayments and other receivables

30 June 31 December

2007 2006


RMB’000 RMB’000

Deposits paid for potential investment 204,795 —

Deposits and prepayments for purchase of properties 70,304 39,754

Deposits for purchase of available-for-sale financial assets — 1,569

Prepayment for construction of properties 120,000 —

Rental deposits 9,163 45,332

Prepaid rental 23,950 950

Advances to suppliers 2,753 38,097

Advances to third parties 30,000 5,000

Others 15,303 4,134

476,268 134,836

The carrying amounts of deposits and other receivables approximate their fair values.

Interim Report 2007


31

15. Cash in transit

30 June 31 December

2007 2006


RMB’000 RMB’000

Cash in transit 10,438 15,159

Cash in transit represents the sales proceeds settled by debit cards or credit cards, which have yet to

be credited by the banks to the Group.

16. Cash and cash equivalents and pledged deposits

30 June 31 December

2007 2006


RMB’000 RMB’000

Cash in hand 170 1,763

Cash at bank 1,852,398 316,098

Short-term deposit 274,610 —

Pledged time deposits with original maturity of

more than three months when acquired (Note 20) 219,231 —

2,346,409 317,861

Less: Pledged time deposits with original maturity of

more than three months when acquired (219,231) —

Cash and cash equivalents 2,127,178 317,861

(a) The weighted average effective interest rate per annum on cash at bank on demand was

approximately 3.53% for the six months ended 30 June 2007 (six months ended 30 June 2006:

0.72%).



17. Share capital

Authorized

Number ofshares USD RMB

Upon incorporation of the Companyon 8 November 2006 50,000 50,000 393,500

Share subdivision on 30 December 2006and at 30 June 2007 (Unaudited) 5,000,000,000 50,000 393,500

Issued and fully paid up

Number ofshares USD RMB’000

As at 1 January 2007 (Audited) 1,350,000,000 13,500 105Issue pursuant to the placing and

public offer (a) 450,000,000 4,500 35

As at 30 June 2007 (Unaudited) 1,800,000,000 18,000 140

(a) On 20 March 2007, the Company issued 450,000,000 shares of USD0.00001 each through aplacing and public offer of the Company’s shares in Hong Kong (the “New Issue”) at a considerationof HKD5.39 per share, totall ing approximately HKD2,425,500,000 (approximatelyRMB2,401,585,000). The share issue costs were approximately HKD110,418,000 (approximatelyRMB109,240,000).

18. Trade payables

30 June 31 December2007 2006

(Unaudited) (Audited)RMB’000 RMB’000

Trade payables 235,587 269,708

Trade payables as at the respective balance sheet dates were denominated in RMB and were agedwithin 60 days.

The carrying amounts of trade payables approximate their fair values.

Interim Report 2007


33

19. Other payables

30 June 31 December

2007 2006


RMB’000 RMB’000

Advance from customers 124,667 102,959

Other liabilities to local government 13,651 13,651

Other tax payables 10,554 45,618

Bonus and welfare payable 16,387 12,205

Deposits received from suppliers/concessionaires 6,318 4,039

Accruals 5,621 3,459

Others 27,065 18,236

204,263 200,167

The carrying amounts of other payables approximate their fair values.

20. Interest-bearing borrowings

30 June 31 December

2007 2006


RMB’000 RMB’000

Short-term bank borrowings 940,000 649,000

Representing:

— unsecured bank borrowings 340,000 70,000

— guaranteed bank borrowings — 429,000

— secured bank borrowings (a) 600,000 150,000

Total borrowings 940,000 649,000



20. Interest-bearing borrowings (Continued)

(a) Secured bank borrowings as at 30 June 2007 were secured by certain of the Group’s buildings,

investment properties and land use rights (Note 10) and pledged time deposits (Note 16).

(b) The effective interest rates per annum at the respective balance sheet dates are as follows:

30 June 31 December

2007 2006


Short-term bank borrowings 5.27% to 6.73% 5.02% to 6.73%

(c) The carrying amounts of all borrowings as at 30 June 2007 approximate their fair values and

they are all denominated in RMB.

21. Share option scheme

The share option scheme was conditionally approved pursuant to a resolution passed by the Company’s

shareholders at an extraordinary general meeting held on 24 February 2007. According to this share

option scheme, the directors may invite the Group’s employees, senior management, directors and

other eligible participants to take up share options of the Company. The subscription price is determined

by the directors and will be determined according to the higher of (i) the average official closing price

of the shares on the Stock Exchange of Hong Kong (the “SEHK”) for the five trading days immediately

preceding the relevant offer date and (ii) the official closing price of the shares on the SEHK on the

relevant offer date. Options granted become vested after certain period. An option may be exercised

in accordance with the terms of the Share Option Scheme at any time during a period to be notified

by the Board to each grantee and unless the Board shall otherwise resolve in relation to any option at

the time of grant.

The maximum number of shares in respect of which Options may be granted under the Share Option

Scheme when aggregated with the maximum number of shares in respect of which options may be

granted under any other scheme involving the issue or grant of options over shares or other securities

by the Group shall not exceed 10% of the issued share capital (such 10% limit representing 180,000,000

shares). Options lapsed in accordance with the terms of the Option Scheme shall not be counted for

the purpose of calculating the 10% limit. Any further grant of share options in excess of this limit is

subject to the approval of the Company’s shareholders.

Share options for 11,600,000 shares were granted on 21 March 2007 at the exercise price of HKD6.44

per share.

Interim Report 2007


35

21. Share option scheme (Continued)

The fair value of options granted during the period determined using the Black-Scholes-Merton Option

Pricing Model was approximately RMB15,196,000.

The significant inputs into the model were as follows:

Granting date 21 March 2007

Fair value at grant date HKD1.05–1.59

Weighted average share price at grant date HKD6.30

Exercise price HKD6.44

Volatility 30%

Expected life of option (year) 1.5–4.5

Expected dividends pay out rate 2.0%

Risk-free interest rate 3.90%–4.05%

The volatility measured at the standard deviation of expected share price returns is based on statistical

analysis of daily share prices over the available trading period.

For the six months ended 30 June 2007, the Group recorded share-based payment expenses in

relation to share options of the Company granted to employees (including certain directors of the

Company) of the Group of approximately RMB1,051,000.

22. Commitments

(a) Capital commitment

I) capital commitment for construction of property, plant and equipment:

30 June 31 December

2007 2006


RMB’000 RMB’000

Not later than 1 year 118,274 —

Later than 1 year and not later than 3 years 1,053 —

119,327 —



22. Commitments (Continued)

(a) Capital commitment (Continued)

II) investment commitment:

i) On 31 October 2006, Zhejiang Intime and Lotte Shopping Company Limited (“Lotte”)

entered into a joint venture agreement to establish a joint venture (the “Lotte JV”) in

the PRC with a registered capital of USD20,000,000 to operate a department store in

the PRC. Each joint venture partner agrees to contribute USD10,000,000 to Lotte JV

and owns 50% of its equity interest. The term of the Lotte JV is for a period of 30

years. In addition, to secure an operating premise for the Lotte JV, Zhejiang Intime

and Lotte entered into a lease contract with Beijing Jixiang Real Estate Co., Ltd.

(“Beijing Jixiang”) which is a 35.6% owned associate of China Yintai Holdings Co.,

Ltd. (“China Yintai”), for the rental of a building for 10 years tentatively starting from 25

March 2008 with annual minimum lease payment of RMB95,100,000. Upon the

establishment of the Lotte JV, all rights and obligations under the lease contract will

be transferred to the Lotte JV. 50% of this lease commitment has been included in

note (b) below.

ii) On 10 April 2007, Zhejiang Intime entered into an agreement with the equity holder of

Hangzhou Xintai Property Development Co., Ltd. (杭州新泰房地產開發有限公司,

“Xintai”) and the equity holder of Zhejiang Zhelian Property Group Co., Ltd (浙江浙聯

房產集團有限公司, “Zhelian Property”). Xintai and Zhelian are the joint owners of a

property development project in Hangzhou City. Pursuant to the agreement, Zhejiang

Intime conditionally agreed, amongst other things, to make capital contribution of

RMB500,000,000 to Xintai in return for 50% equity interest in the enlarged registered

capital of Xintai.

Interim Report 2007


37

22. Commitments (Continued)

(b) Operating lease commitments as a lessee

The Group leases certain of its stores and office premises under non-cancellable operating

lease agreements.

The Group’s future aggregate minimum lease payments under non-cancellable operating leases

are as follows:

30 June 31 December

2007 2006


RMB’000 RMB’000

Not later than 1 year 64,600 43,920

Later than 1 year and not later than 5 years 419,023 466,258

Later than 5 years 1,182,449 1,110,220

1,666,072 1,620,398

(c) Operating lease commitments as a lessor

The Group’s future aggregate minimum lease receivables under non-cancellable operating leases

are as follows:

30 June 31 December

2007 2006


RMB’000 RMB’000

Not later than 1 year 3,943 6,186

Later than 1 year and not later than 3 years 6,393 13,866

Later than 3 years 2,718 4,335

13,054 24,387

The amounts above include future minimum sublease payments expected to be received under

non-cancellable sublease amounting to RMB7,752,000 as at 30 June 2007 (31 December 2006:

RMB10,297,000).



23. Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the

other party or exercise significant influence over the other party in making financial and operation

decisions. Parties are also considered to be related if they are subject to common control or common

significance influence.

(a) Name and relationship of related parties

Name Relationship

Mr. Shen Guojun Ultimate shareholder of the Company

Intime International Holdings Limited Intermediate holding company of the Company

(“Intime International”)

Warburg Pincus & Co. Shareholder of the Company

Glory Bless Limited (“Glory Bless”) Controlled by the ultimate shareholder

China Yintai Controlled by the ultimate shareholder

Silvertie Holding Co., Ltd. 20.63% of its shares were held by China Yintai

(“Silvertie Holding”)

Beijing Jixiang Subsidiary of China Yintai

Hangzhou Intime Shopping Mall Co., Ltd. Subsidiary of China Yintai

(“Intime Shopping Mall”)

Wenzhou Yintai Department Store Co., Ltd. Subsidiary of China Yintai

(“Wenzhou Yintai”)

Jinhua Yintai Department Store Co., Ltd. Subsidiary of China Yintai

(“Jinhua Yintai”)

Interim Report 2007


39

23. Related party transactions (Continued)

(b) Transactions with related parties

The following transactions were carried out with related parties:

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Interest income

— China Yintai — 1,984

Interest expense

— Warburg Pincus — 8,106

Payment of rental expense and management fee

— Silvertie Holding (i) 13,695 13,707

Purchase of inventory

— Wenzhou Yintai 5,797 —

Advance to related parties

— Beijing Jixiang (ii) 97,078 —

— Jinhua Yintai — 20

— Wenzhou Yintai 7,561 6,632

104,639 6,652

Repayment from related parties


— Jinhua Yintai — 10,000

— 180,612




(b) Transactions with related parties (Continued)

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Borrowings from related parties

— Intime International — 51,655

— Warburg Pincus — 161,434

— 213,089

Repayment to a related party

— Glory Bless — 247,535

Guarantee from a related party

— China Yintai (iv) — 339,000

(i) Pursuant to an agreement between Shanghai Intime and Silvertie Holding signed on 31

March 2005, Shanghai Intime leased certain floors of a building from Silvertie Holding for its

operations.

(ii) Zhejiang Intime and Lotte Shopping Company Limited (“Lotte”) has entered into a joint

venture agreement to establish the Lotte JV. The Lotte JV will lease certain premises for its

shopping mall operations from Beijing Jixiang. Since the Lotte JV was not yet established

as at 30 June 2007, the Group made advances to Beijing Jixiang on behalf of the Lotte JV

for the prepaid rental and the decoration of the premises where the shopping mall locates

amounted to approximately RMB35,578,000 and RMB61,500,000 respectively.

(iii) As at 31 December 2006, Zhejiang Intime provided a guarantee amounting to

RMB20,000,000 in respect of loan granted by a bank to Wenzhou Yintai. The relevant loan

and interest was repaid by Wenzhou Yintai on 25 February 2007 and the guarantee was

released.

(iv) The guarantee from China Yintai was released in January 2007.

Interim Report 2007


41


(c) Balances with related parties

The Group had the following significant balances due from related parties:

30 June 31 December

2007 2006


RMB’000 RMB’000

Due from related parties

— Silvertie Holding (i) 6,544 13,000

— Beijing Jixiang 97,078 —

— Warburg Pincus 1,269 —

— Wenzhou Yintai 4,178 10,538

— Jinhua Yintai 13,773 25,195

— Intime Shopping Mall 3,040 2,013

125,882 50,746

The Group had the following significant balances due to related parties:

30 June 31 December

2007 2006


RMB’000 RMB’000

Due to related parties

— Jinhua Yintai 3,219 —


3,219 8,871

These amounts due to related parties are all denominated in RMB, unsecured, interest-free and

payable on demand.




(c) Balances with related parties (Continued)

The carrying amounts of these related party balances approximate their fair values.

(i) The amount due from Silvertie Holding includes deposit of RMB6,500,000 in connection

with a lease agreement between Shanghai Intime and Silvertie Holding entered into on 31

March 2005.

(d) Key management compensation

For the six months

ended 30 June

2007 2006


RMB’000 RMB’000

Fees, salaries, allowances and other benefits 1,626 670

Discretionary bonus 195 298

Contributions to retirement plan 18 29

Share options granted to key management 1,051 —

2,890 997

24. Contingencies

30 June 31 December

2007 2006


RMB’000 RMB’000

Guarantees to related parties — 20,000

As at 31 December 2006, Zhejiang Intime provided a guarantee amounting to RMB20,000,000 in

respect of a loan granted by a bank to Wenzhou Yintai. The relevant loan and interest was repaid by

Wenzhou Yintai on 25 February 2007 and the guarantee was released.

Interim Report 2007


43

25. Post balance sheet event

On 10 September 2007, Intime Investment Management Company Limited, a wholly-owned subsidiary

of the Company, entered into a sale and purchase agreement and a loan assignment agreement with

Zhelian Property, pursuant to which Intime Investment Management has agreed to acquire and Zhelian

Property has agreed to sell: 1) a 33% equity interest in 杭州海威房地產開發有限公司 (Hiwell Real

Estate Company Limited) (“Hiwell Real Estate”) for a total cash consideration of RMB33,000,000.00

and; 2) the outstanding shareholder’s loan made by Zhelian Property to Hiwell Real Estate for a total

cash consideration of RMB204,808,370.96.

26. Detail information of the subsidiaries

Attributable equity

Country and date interests held Principal

of incorporation/ Issued/ by the equity holders activities

establishment and registered and of the Company and place

Company name kind of legal entity paid up capital 2007 2006 of operation

North Hill Holdings British Virgin Islands USD1 100% — Investment holding,

Limited (“BVI”), 8 March 2005, (Direct) BVI

limited liability company

River Three Holdings BVI, 8 March 2005, USD1 100% — Investment holding

Limited limited liability company (Direct) and trade mark

management, BVI

Zhejiang Intime PRC, 7 August 1997, RMB 100% 100% Operation and

Department limited liability company 200,000,000 (Indirect) (Indirect) management of

Store Co., Ltd. department stores

and investment

holding, PRC

Intime Department PRC, 7 January 2005, RMB 100% 100% Operation and

Store Co., Ltd. limited liability company 100,000,000 (Indirect) (Indirect) management of

department stores

and investment

holding, PRC

Ningbo High-Tech Zone PRC,14 December 2004, RMB 100% 90% Software

Guo Ruan Technology limited liability company 1,000,000 (Indirect) (Indirect) development,

Company Limited PRC



26. Detail information of the subsidiaries (Continued)

Attributable equity

Country and date interests held Principal

of incorporation/ Issued/ by the equity holders activities

establishment and registered and of the Company and place

Company name kind of legal entity paid up capital 2007 2006 of operation

Hangzhou Intime Outlets PRC, 26 July 2000, RMB 100% 74% Investment holding,

Commercial limited liability company 20,000,000 (Indirect) (Indirect) PRC

Development Co., Ltd.

Wuhan Yintai Business PRC, 29 April 2005, RMB 100% 75.5% Investment holding,

Development Co., Ltd. limited liability company 150,000,000 (Indirect) (Indirect) PRC

Zhejiang Wenzhou Intime PRC, 5 January 2007, RMB 100% — Operation and

Department Store limited liability company 30,000,000 (Indirect) management of

Co., Ltd. department stores

and investment

holding, PRC

Zhejiang Intime PRC, 10 January 2007, RMB 100% — Operation and

Department Store limited liability company 30,000,000 (Indirect) management of

(Jinhua) Co., Ltd. department stores

and investment

holding, PRC

Jinhua Intime Shopping PRC, 6 March 2007, RMB 60% — Operation and

Mall Center Co., Ltd. limited liability company 30,000,000 (Indirect) management of

department stores

and investment

holding, PRC

2007 Interim Report - INTIME.COM.CN · Management Discussion and Analysis 7 With the concerted...

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